5 gut checks before the stock market’s opening bell

By Shawn Langlois

Reuters

Anne’s kiss might be aimed at Berkshire investors

Good morning.

The S&P 500′s seven-week rally came to an end last week. So did earnings season, with a thud.

Yellow flags are being waved everywhere. Our call of the day throws around the possibility of a 10% retreat. J.P. Morgan’s Thomas Lee, known for his bullish bent, jumped in the fray Friday, saying the S&P would look more compelling around 1,400 to 1,450.

But Birinyi Associates isn’t one of those calling for a pullback, despite a big shift to the bearish side in its Ticker Sense blogger sentiment poll. Data shows that the S&P 500 has now gone 505 days without a 10% drop from a recent high. That’s happened five times since 1962, so it’s not THAT rare and no reason to be alarmed.

“Looking at the history of the market, there has been no consistent point or metric during bull markets that indicate that the market is due for a correction,” Birinyi research analyst Kevin Pleines told WSJ’s MarketBeat this morning.

The chart of the day: This one could have worked for the call of the day, but the chart is really the key. “The sad truth is that fundamentally (top-down and bottom-up) things are not doing so great,” writes Zero Hedge in a post that lays out the case for a 5% to 10% correction. Here’s the illustration from Goldman Sachs that Zero Hedge says is pointing to an imminent downturn as “some cracks are appearing in the unbreakable vestibule of central bank liquidity.”

The story points to a Huffington Post piece with the classic title: “The Hathaway Effect: How Anne gives Warren Buffett a rise,” in which Dan Mirvish makes several correlations of big news days for her, and big (kinda) stock gains for Berkshire Hathaway. “My guess is that all those automated, robotic trading programming are picking up the same chatter on the internet about ‘Hathaway’ as the IMDb’s StarMeter, and they’re applying it to the stock market,” he wrote.

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Need to Know (NTK) guides investors to the most important, insightful items required to chart a course ahead of each trading day. Anchored by lead writer Shawn Langlois, NTK will sift through the fire hose of news, commentary and data, from traditional and non-traditional sources, and extract what’s most essential. You can start reading NTK here as it begins publishing at approximately 6:30 a.m. ET, or sign up here to get a version in your email box every morning at approximately 8:45. a.m. ET.